Motor car registrations dip in March

Total motor car registrations recorded 2,148 units down from 3,079 units the previous month and 2,901 12-months ago.

In the brand new segment registrations were 786 units down from 1,149 units the previous month and 1,070 units 12-months ago. Maruti cars recorded 213 units down from 323 units the previous month and 525 units 12 months ago.

As a point of reference in March 2015 the figure was 2,539 units and at its high point in September 2015 it was 8,029 units. Datsun only posted 33 units down from 84 units and Renault posted 25 units down from 76 units the previous month, both these cars are manufactured at the same plant in Chennai.

Micro posted 166 units claiming the second highest share for the month. Financing share was 51.5% down from 67.1% clearly indicative of the 50% LTV rule coming into full force. Pre-owned motor car registrations recorded 1,362 units down from a relatively high 1,930 units the previous month and also down from 1,831 units 12-months ago.

Toyota was the market leader recording 727 units down from 1,060 units the previous month followed by Suzuki with 373 units and Honda with 202 units. Financing share was 49.2% way below the previous months 61.4%. Premium motor cars recorded 54 new units and 17 pre-owned units for the month down from 67 and 35 units in comparison with the previous month respectively.

Except for a Mercedes Benz C180s an entry level prestige car almost all other brands have recorded meagre numbers.
Electric cars recorded 26 units in the month down from 40 units the previous month and significantly down from 156 units 12 months ago. Nissan Leaf recorded 20 units down from 26 units the previous month. SUVs recorded 361 units in the month down from 434 units the previous month and 571 units 12 months ago.
Honda was the market leader recording 191 mainly through its crossover Vezel followed by Toyota recording 59 units – 32 Prados and 19 Toyota Land cruisers probably imported on MP permits.
Financing share was 49% down from the regular figure of 60%. Hybrids recorded 1,303 units down from 1,856 units the previous month and significantly down from 2,009 units 12 months ago. In the car segment Toyota recorded 492 units (Aqua – 168 units, Axio – 293 units and Prius 22) followed by Suzuki with 360 units (Wagon R – 280) and Honda with 201 units (Grace 95, Fit 96). Financing share was 51% down from the upper 60s.
www.dailynews.lk

NSB posts highest ever Rs. 13.3 bn PBT for 2016

The National Savings Bank’s operating profit at Rs. 16.1 billion recorded 4% increase as compared to the previous year.

These reported profits were achieved despite lower interest margins on account of an elevated market interest rate scenario, the bank said yesterday.

The growth in its traditional lines of business enhanced fee based income and improvement in credit quality of its asset portfolio resulting in lower provisioning being the main contributory factors leading to this growth in profitability.

Interest income of the bank grew by 11% to reach Rs. 86.4 billion whilst the net interest margin reduced to 2.9% in 2016 from 3.3% in 2015. The bank has augmented these market challenges with growth in volumes to post an increased profit. The total assets of the bank surpassed Rs. 900 billion and are currently at Rs. 911.7 billion, whilst the deposit base grew by 10% to reach Rs. 657 billion by year 2016. The bank’s loans and advances portfolio grew by 19% primarily assisted by advances within the retail sector. Its Non Performing Loan ratio at 1.55% testifies prudent management of its asset portfolio with emphasis on strengthening its balance sheet.

A contribution of Rs. 19.2 billion to the government in the form of dividends, levies and taxes is the highest in its history, thus signifying its critical role within the state sector. As another unique initiative, the Bank raised Rs. 6.0 billion from the local market through a private placement of debentures to strengthen the Tier II capital. The Bank’s Tier 1 capital adequacy ratio stood at 12.5% while the total capital adequacy was 14.7% at the end of the year 2016.
www.dailynews.lk

Damro enters plantations with Rs. 5 b deals on Pussellawa and Agalawatte

• Browns exits loss-making Agalawatte acquired from Mackwoods in July last year
• Reduces stake in managing firm of Pussellawa from 55% to 10% at hefty profit

Popular furniture brand and South Asia’s largest retailer Damro is entering the plantation industry with strategic investments in Agalawatte and the managing company of Pussellawa.

In two separate yet connected deals yesterday, the Damro group of companies acquired 45.1% stake in Pussellawa Plantations Plc’s managing agents FLMC Plantations Ltd. for Rs. 4.7 billion and a controlling 61.1% stake in Agalawatte Plantations Plc for Rs. 275 million.

Through the deals, the Browns Group reduced its exposure to the plantation sector.

Browns Capital Plc (formerly known as FLC Holdings Plc) divested 4.5 million shares in FLMC Plantations Ltd. at Rs. 1,040 per share. The buyers were Piyestra Furniture Ltd. (2.588 million shares for Rs. 2.69 billion), D.R. Furniture Manufacturing Ltd. (0.96 million shares for Rs. 1 billion) and D.R.M. Manufacturing Ltd. (0.96 million shares for Rs. 1 billion).

Browns will continue to hold 10% stake in FLMC Plantations giving Damro control in the managing company. The balance 45% stake is held by a foreign shareholder. The carrying value of Brown’s 55% stake in FLMC Plantations in FY2016 was Rs. 600 million.

FLMC Plantations is Browns Capital’s management and investment company for plantations.

Coming under Browns Capital Plc, Pussellawa Plantations Ltd. has a mix of tea and rubber plantations, with 2,492 hectares of tea and 3,371 hectares of rubber. Spanning over 11,000 hectares, the 13 estates are geographically located in the Colombo and Ratnapura districts and 11 estates in the Pussellawa and Kandy areas.

Browns Capital also owns Maturata Plantations and has interests in the power, leisure and real estate sectors through its subsidiaries, associates and sub-subsidiary companies.

Separately, Browns Power Holdings Ltd., a fully-owned subsidiary of Browns Capital Plc, sold 15.27 million shares in Agalawatte Plantations Plc (APL) to D.R. Investment Ltd. at Rs. 18 per share.

Owning tea, rubber and oil palm assets with nearly 11,000 hectares, APL is loss-making and previously came under the Mackwoods Group. Its net asset per share as of August 2016 was Rs. 10, down from Rs. 20.78 a year earlier. Browns acquired the stake at Rs. 20 per share in July last year.

As at August 2016, the retained loss at APL was Rs. 964 million. The loss from continuing operations in the six months ended June 2016 was Rs. 195 million, though down from the Rs. 376 million of a year ago.

The Damro Group styles itself as South Asia’s largest furniture manufacturer and Sri Lanka’s number one furniture retail network. In recent years it has expanded its product offering to cover consumer electronics and durables. Since Damro was established in 1986 it has achieved rapid success and has expanded to over 200 showrooms including over 60 in India. It employs nearly 10,000 people.

Analysts said its entry into the plantation sector was linked to enjoying the readily available raw material of timber for its booming furniture range as well as to harness its wider prospects through better management of plantations’ core products.
www.ft.lk

FMO Netherland, SBI-FMO Fund and IFC to invest $ 22 m in SDB bank

At an extraordinary general meeting held last week, shareholders of SANASA Development Bank (SDB Bank) approved an Equity and Funding package amounting to $ 22.21 million (Rs. 3.3 billion).

Out of this $ 9.82 million (Rs. 1.46 billion) will be added to the capital base of SDB Bank by way of equity while a further $ 12.39 (Rs. 1.84 billion) will be through long-term senior and subordinated convertible term loans.

SDB Bank, which is undergoing a major transformation process, has invested substantially in improving its technology and efficiency. 

www.ft.lk

People’s Bank Group posts record results in 2016

• Pre-tax profit up 5.4% to Rs. 25.4 b; After-tax profit rises by 19% to Rs. 18 b
• Gross income up 17% to Rs. 144.7 b
• Two Rs. 1 trillion achievements – first for any Sri Lankan bank in one year

People’s Bank yesterday announced an impressive financial performance for the FY 2016, with all Key Performance Indicators showcasing a striking upward trajectory in the group’s performance.

The group posted a PBT of Rs. 25.4 billion, an increase of 5.4% which provides an example of the group’s unwavering commitment to broaden its vision, action and impact. The 19.2% growth seen in a PAT of Rs. 18 billion, increasing from Rs. 15.1 billion, further reiterates this promise.

Etching one of the many milestones it had this year, total gross income reached a record performance of Rs. 144.7 billion, a 16.9% growth compared to the Rs. 123.8 billion recorded at end 2015. Net surpluses were evident across all aspects of investment operations with revaluation and available for sale reserves posting Rs. 11.9 billion and Rs. 0.3 billion respectively.

The group’s Return on Average Equity was 22.7% compared to last year’s 22%, while the total contribution via taxation, special levies and dividends reflects the integral role the group plays in national economic development, with its Rs. 22.9 billion contribution once again considerably higher than last year’s Rs. 19.5 billion.People’s Bank Group Chairman Hemasiri Fernando said that the group’s results demonstrated its journey within the fast-evolving financial services industry, maintaining an insistent focus on every stakeholder.

“Our results are self-attesting to an unrelenting pursuit to add consistent value for the benefit of all our stakeholders. Needless to say, the market circumstances in 2016 were challenging and from a macroeconomic standpoint these included inflationary pressures and a tightening monetary policy which led to a rise in interest rates and high earnings pressure.”

The bank, which has won multiple awards both locally and globally, holds the distinction of being the 387th-largest bank in Asia as per the Asian Banker magazine. People’s Bank’s Return on Equity stands among the top 20 in the region, while another benchmark it set this year was the 27.5% Return on Average Equity, which in 2015 was 27.1%.

“Our successes are ultimately owed to our customers for their trust and confidence in our efforts, our regulators for their support and wise counsel and importantly our employees, who consciously and very diligently push the boundaries of success and performance even amidst challenging circumstances,” Fernando opined.

This customer loyalty is well-reflected in the Rs. 1.1 trillion in customer deposits, representing a 20% growth over the end of 2015’s Rs. 932.9 billion, certainly one of the highest in the country. Similarly, customer advances too touched the Rs. 1 trillion mark, with a 16.6% growth over last year’s Rs. 869.8 billion at a group level

Opining that 2016 has been a year of new highs for the bank, CEO/General Manager Vasantha Kumar said: “It’s been one of continuous positive improvement across several aspects of business operations both quantitative and qualitative. It was a year that witnessed two Rs. 1 trillion feats in a single year - the first for any bank, gross income generating capability crossing the Rs. 140 billion mark, loan book composition further improved and the gross non-performing loan ratio reaching a ten-year low - the latter providing evidence of a further improved risk management framework and collection and recovery process.”

This is well evidenced in the ten-year low Gross NPL ratio of 1.9% (which in 2015 was 2.4%), highlighting the hallmark consistency that People’s Bank has continued to espouse and also a total asset base of Rs. 1.4 trillion, which is an 11.6% growth over Rs. 1.3 trillion at end 2015.

In analysing the group’s Capital Adequacy Ratio of 13% with a Tier I ratio or 11.1% and the bank’s CAR of 12.1% and 9.8% respectively, Fernando clarifies that “in terms of near-term goals, bolstering our regulatory capital levels remains a priority and a work in process. Ongoing discussions with the Ministry of Public Enterprise Development and the recent Cabinet approval received to amend the People’s Bank Act are viewed very positively in this connection.”

Kumar adds that the corporate plan of 2016-2020 forms an integral facet to this success with several new initiatives propelling the bank towards a new era of performance and delivery capabilities. “Core to them all is digitisation,” he says of the digitisation process that began in 2015 and is well on target to be fully-operational by end 2017.

“Backed by technology of global repute and a team unlike any other, this will put us on par with international counterparts in terms of our customer convenience offerings. Not complacent with our successes and conscious of the challenges that may lie ahead, we look to the future with a great degree of optimism.”

A full set of financial statements can be accessed at www.peoplesbank.lk.
www.ft.lk

NDB Capital Holdings to invest in Sri Lanka’s RIL Property IPO

ECONOMYNEXT – NDB Capital Holdings Limited (NCAP) will take up part of the Initial Public Offering of RIL Property Limited (RIL), the owner and operator of commercial office space in the Sri Lankan capital Colombo, which opens next week.

According to the prospectus, NCAP has been identified by RIL as a Cornerstone Investor for the IPO at the issue price of 8 Rupees a share.

RIL intends to offer 120 million ordinary voting shares in the IPO opening on April 4, 2017, to raise 960 million Rupees.

NCAP has committed to subscribe for up to 25,000,000 shares amounting to 200 million Rupees via the Non-Retail Investor Category of the IPO.

RIL has agreed to ensure that NCAP is allotted a minimum of 15,000,000 shares amounting to 120 million Rupees.

In the event of an oversubscription, this would result in NCAP being allocated 12.50 percent of the total shares issued via the IPO and having a shareholding of 2.50 percent of RIL.

In the event of an undersubscription, NCAP would be allocated 25,000,000 shares amounting to 40.00 percent of the total shares issued via the IPO and would have a 4.61 percent shareholding in the company.

NCAP has voluntarily undertaken not to sell the shares for six months starting from the listing date.

NCAP is the parent company of NDB Investment Bank Limited, joint managers to the issue.

In the event of an undersubscription, Commercial Bank of Ceylon, the IPO underwriter, will subscribe up to a maximum of 37,500,000 shares at the offer price amounting to a total value of 300 million Rupees, 31.25 percent of the total IPO and 6.25 percent of the total shares of the company post-IPO.

Sri Lanka’s Browns sells 61-pct stake Agalawatte Plantations

ECONOMYNEXT – Sri Lanka’s Browns Group has sold a 61% stake in Agalawatte Plantations to D. R. Investment (Pvt) Ltd, a stock exchange filing said.

Browns sold 15,274,527 million shares at Rs18 a share in a Rs274.9 million deal.

Its controversial acquisition of the loss-making Agalawatte Plantations from Mackwoods group had been challenged in court.

Nestlé’s Sri Lanka unit gains on bourse ahead of financial year-end

ECONOMYNEXT – Sri Lankan stock market players Thursday pushed up the price of the local unit of food multinational Nestlé, a day before the financial year-end for most companies and fund managers, analysts said.

The share price of Nestlé Lanka rose Rs89.2 to Rs2,100 with just 100 shares traded on the Colombo stock exchange, boosting the All Share Price Index by 10.9 points, the biggest contributor to the day’s gain in the benchmark index.

Analysts had warned investors to watch for ‘window dressing’ on the CSE ahead of the March financial year-end when share prices are sometimes pushed up.

Nestlé Lanka has a market capitalisation of Rs112.2 billion and accounts for 4.62% of the CSE total market cap.

Sri Lanka 03-month Treasury Bill yield reaches 9.63-pct

ECONOMYNEXT – Sri Lankan Treasury Bill yields rose across the board at Wednesday’s auction with the 03-month bill yield up 06 basis points to 9.63 percent, the public debt office, a unit of the central bank, said in a statement.

The 06-month bill yield rose 16 basis points to hit 10.62 percent while the 01-year bill yield also rose 16 basis points to reach 10.98 percent.

The public debt department got Rs48.3 billion worth of bids and accepted bids worth Rs17 billion.

Sri Lankan shares rise for 3rd session on foreign buying, window dressing

Reuters: Sri Lankan shares rose for a third straight session on Thursday, closing at their highest in more than one week, helped by foreign investor buying and quarter-end window dressing, stockbrokers said.

The Colombo stock index closed 0.31 percent firmer at 6,040.18, its highest close since March 21.

On Monday, it had closed at its lowest since March 15, 2016 after the central bank tightened its monetary policy on Friday by 25 basis points to contain high inflationary expectations.

Stockbrokers said rising interest rates have kept most investors on the sidelines. Yields on treasury bills rose 6-16 basis points at a weekly auction on Wednesday.

"Local buying demand is increasing and the market is moving up on blue chips. Buying interest from the retail side is slowly improving," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Local buying interest has now started to improve but the foreign side is still dominating."

Foreign investors net bought shares worth 200 million rupees ($1.32 million) on Thursday, raising the year-to-date net foreign inflow to 4.58 billion rupees in equities.

Turnover stood at 1.18 billion rupees, well above this year's daily average of 718.3 million rupees.

Shares of Nestle Lanka Plc jumped 4.46 percent, Ceylon Theatres Plc rose 10.30 percent, Ceylon Cold Stores Plc gained 0.82 percent, and Commercial Bank of Ceylon Plc, the country's biggest listed lender, ended up 0.93 percent. 

($1 = 151.8500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares rise on foreign investor buying; turnover hits 1-mth high

Reuters: Sri Lankan shares closed slightly stronger on Tuesday, recovering from a more than one-year closing low hit in the previous session, as foreign investors bought battered stocks while block deals pushed the day's turnover to a one-month high.

The Colombo stock index closed 0.17 percent firmer at 5,985.08, closing below a key psychological level of 6,000.

It had closed at its lowest since March 15, 2016 on Monday as investors sold shares of lenders after the central bank tightened its monetary policy on Friday.

The central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand-side inflationary pressures.

"The market is up on continued foreign buying while block deals pushed the turnover up," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.

"Retail investors are still on the sidelines as they want to see a clear picture."

Foreign investors net bought shares worth 401.2 million rupees ($2.64 million) on Tuesday, raising the year-to-date net foreign inflow to 4.29 billion rupees in equities.

Turnover stood at 2.32 billion rupees ($15.29 million), the highest since Feb. 28 and well above this year's daily average of 716.1 million rupees.

As of Monday's close, the index had lost 2.18 percent since March 7 when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The stock index moved to "neutral" territory from "oversold", with the 14-day relative strength index rising to 30.957 versus Monday's 27.488, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Dialog Axiata Plc rose 2.70 percent, while Sri Lanka Telecom Plc climbed 1.55 percent. 

($1 = 151.8000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares slump to one-year low as banks fall

Reuters: Sri Lankan shares fell to a more than one-year closing low on Monday in dull trade as investors sold shares of lenders after the central bank tightened monetary policy in the previous session, dealers said.

On Friday, the central bank raised its benchmark interest rates by 25 basis points for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.

The Colombo stock index closed 0.36 percent weaker at 5,974.94, its lowest close since March 15, 2016. The index broke below a key psychological barrier of 6,000 on Wednesday.

"Margins (calls) are still affecting the market. Buying interest still hasn't come back into the market," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Investors took the rate hike as a positive as it will give some kind of stability in the economy and the hike was less than what they expected. But investors are still waiting for the market to bottom out to get in."

Turnover stood at 429 million rupees ($12.7 million), less than this year's daily average of 688.4 million rupees.

The index had lost 2.18 percent since March 7 after the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse fell to "oversold" territory from "neutral", with the 14-day relative strength index dropping to 27.488 points versus Friday's 30.480, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 76.3 million rupees on Monday, raising the year-to-date net foreign inflow to 3.89 billion rupees in equities.

Shares in Melstacorp Plc fell 3.06 percent while the biggest listed lender Commercial Bank of Ceylon Plc fell 1.59 percent. 

($1 = 151.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Vyas Mohan)

Sri Lankan shares edge up from 1-yr low on foreign buying

Reuters: Sri Lankan shares edged up on Friday from a more than one-year closing low as foreign investors picked up battered shares in a market that had already factored in a monetary policy tightening by the central bank, dealers said.

The central bank raised its benchmark interest rates by 25 basis points on Friday for the first time in eight months to contain high inflationary expectations and a possible acceleration of demand side inflationary pressures.

The Colombo stock index closed 0.3 percent up at 5,996.28, edging up from its lowest close since March 15, 2016 hit on Thursday. The index breached a key psychological barrier of 6,000 on Wednesday.

"Foreigners are buying in the 'oversold' market and are looking at the long term," said Yohan Samarakkody, head of research at SC Securities.

"Rate hike was already factored in," Samarakkody said, adding that some investors were expecting a larger hike.

Turnover stood at 1.92 billion rupees ($12.7 million), more than double this year's daily average of 671 million rupees.

The index had lost 2.1 percent through Thursday since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse rose to "neutral" territory from "oversold", with the 14-day relative strength index at 30.480 points versus Thursday's 24.614, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 551.1 million rupees, raising the year-to-date net foreign inflow to 3.81 billion rupees in equities.

Shares in Ceylon Tobacco Company Plc rose 3.9 percent, while Commercial leasing and Fiance Plc jumped 8 percent. 

($1 = 151.4000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal; Editing by Amrutha Gayathri)

Sri Lanka Monetary Policy Review – March 2017 - Policy rates increased by 25 points

As per the provisional estimates of the Department of Census and Statistics (DCS), the Sri Lankan economy grew by 4.4 per cent in real terms during 2016 compared to the growth of 4.8 per cent in 2015. Within this annual growth, Industry related activities grew notably by 6.7 per cent driven by construction related activities, while Services related activities grew by 4.2 per cent mainly with the expansion of financial services, insurance and telecommunications. However, Agriculture related activities contracted by 4.2 per cent in 2016, impacted by supply side disruptions on account of floods in the second quarter and drought conditions during the final quarter of 2016. In spite of challenging external factors such as adverse weather conditions and global developments, an acceleration of growth was observed towards end 2016 with the last quarter of 2016 recording a growth of 5.3 per cent, partly supported by the base effect.

In the meantime, headline inflation, as measured by the year-on-year change in the Colombo Consumers’ Price Index (CCPI, 2013=100), accelerated to 6.8 per cent in February 2017 from 5.5 per cent in January 2017. A similar trend was observed in the National Consumer Price Index (NCPI, 2013=100) based headline inflation, which rose to 8.2 per cent (year-on-year) in February 2017 from 6.5 per cent in January 2017. Year-on-year core inflation based on both CCPI and NCPI also remained high at 7.1 per cent in February 2017. The recent acceleration in inflation is largely due to the impact of prevailing drought conditions and adjustments to the tax structure, and it is projected that inflation would revert to the desired mid single digit levels in the period ahead and stablise thereafter, unless disrupted by adverse inflation expectations.

The earlier tightening of monetary policy and monetary conditions by the Central Bank and the resultant increase in market interest rates are likely to have impacted the growth of credit to the private sector by commercial banks to some extent. Accordingly, the year-on-year growth of private sector credit decelerated further to 20.9 per cent in January 2017 from 21.9 per cent at end 2016. Meanwhile, credit to the public sector increased noticeably, causing year-on-year broad money (M2b) growth to remain high at 17.7 per cent in January 2017, although this was a deceleration compared to 18.4 per cent in December 2016. Nevertheless, the deceleration in monetary and credit aggregates has been slower than expected.

On the external front, the deficit in the trade account of the balance of payments (BOP) was recorded at US dollars 9.1 billion in 2016 compared to US dollars 8.4 billion in 2015, with expenditure on imports increasing by 2.5 per cent and earnings from exports contracting by 2.2 per cent during the year. Provisional data for January 2017 also indicated a widening of the trade deficit. Earnings from tourism and workers’ remittances continued to cushion the adverse impact of the trade deficit on the BOP. In the meantime, outflows of foreign investments from the government securities market observed in early 2017 appear to have subsided, and marginal inflows have been experienced in spite of the increase in policy interest rates in the United States. Gross official reserves were estimated at US dollars 5.6 billion at end February 2017 compared to US dollars 6.0 billion at end 2016, while the Sri Lankan rupee depreciated by 1.2 per cent against the US dollar during the year up to 22 March 2017.

Considering the above developments, the Monetary Board, at its meeting held on 23 March 2017, was of the view that further tightening of monetary policy is necessary as a precautionary measure, in order to contain the build-up of adverse inflation expectations and the possible acceleration of demand side inflationary pressures through excessive monetary and credit expansion. The Monetary Board also took into account the notable improvements in fiscal operations, which have resulted in the overall budget deficit in 2016 declining to envisaged levels. The Board was of the view that these improvements, together with the substantial upward movements already observed in market interest rates, have reduced the required adjustment in policy interest rates. Accordingly, the Monetary Board decided to increase the key policy interest rates of the Central Bank, namely the Standing Deposit Facility Rate (SDFR) and the Standing Lending Facility Rate (SLFR) by 25 basis points each, to 7.25 per cent and 8.75 per cent, respectively, with effect from 24 March 2017.

Sri Lankan shares fall to 1-yr closing low, rate review in focus

Reuters: Sri Lankan shares fell for a second straight session on Thursday to a more than one-year closing low as expectations of an interest rate hike continued to drag down the market ahead of the central bank's monetary policy review.

The Colombo stock index closed down 0.3 percent at 5,979.85, its lowest close since March 15, 2016. The index breached a key psychological barrier of 6,000 in the previous session.

"There are no buyers as most of the local investors are on the sidelines awaiting the outcome of the policy review," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Sri Lanka's central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Analysts said investors expected a rate hike.

Turnover stood at 616.4 million rupees ($4.1 million), less than this year's daily average of 671 million rupees.

The index has lost 2.1 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped further into oversold territory on Thursday, with the 14-day relative strength index at 24.614 points versus Wednesday's 26.758, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 194 million rupees, raising the year-to-date net foreign inflow to 3.26 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in Asian Hotel Properties Plc fell 2.9 percent, while Lanka ORIX Leasing Company Plc fell 0.8 percent and Sri Lanka Telecom Plc 0.9 percent.

($1 = 151.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lanka's NDB ends S&P ratings

ECONOMYNEXT - Standard and Poor's said it was confirming the 'B' long-term rating of Sri Lanka's National Development Bank and withdrawing at the lender's request.

"In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average - albeit improved - funding profile, and its capital and earnings profile remains weak," the rating agency said.

The full statement is reproduced below:

National Development Bank PLC 'B' Rating Affirmed; Rating Then Withdrawn At The Bank's Request

SINGAPORE (S&P Global Ratings) March 20, 2017--S&P Global Ratings said today that it affirmed its 'B' long-term and 'B' short-term issuer credit ratings on National Development Bank PLC (NDB). We then withdrew all the ratings at the bank's request.

The affirmed rating at the time of withdrawal reflected our expectation that NDB would maintain its satisfactory business and revenue diversification over the next 12 months. In our view, the bank has an adequate risk position for its size and business scale. However, the bank's aggressive growth and small branch network have resulted in a below-average--albeit improved--funding profile, and its capital and earnings profile remains weak.

The outlook on the long-term issuer credit rating was stable at the time of the withdrawal. The stable outlook reflected our view that NDB is relatively insulated over the next 12 months compared to peers from potential heightening of economic risks facing all financial institutions operating in Sri Lanka.

Although we expected no rating movement in the next one year, rating upside would have outweighed downside risks over the longer term, given that the bank plans to raise capital.

Sri Lanka 03-month Treasury Bill yield rises to 9.57-pct

ECONOMYNEXT – Yields on Sri Lankan Treasury Bills rose across the board at an auction on Wednesday, with the 03-month bill yield up 10 basis points to 9.57 percent, the public debt department of the Central Bank said.

The 06-months bill yield rose 07 basis points to 10.46 percent and the one-year bill yield rose 08 basis points to 10.82 percent, a statement said.

The public debt department got bids worth 39.4 billion rupees and accepted bids worth 4 billion rupees.

Sri Lankan shares fall to 1-yr closing low, breaching key barrier

Reuters: Sri Lankan shares fell on Wednesday to a more than one-year closing low, breaching a key psychological barrier of 6,000, as expectations of an interest rate hike continued to drag down the market ahead of the central bank's policy review.

The Colombo stock index closed down 0.7 percent at 5,996.65, its lowest close since March 15, 2016.

"The market came down mainly on margin calls," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Investors are expecting a rate hike, so local investors are on the sidelines and only foreign investors are active."

Sri Lanka's central bank could raise its key policy rates in the coming months if it skips a chance to tighten at its second monetary policy review of the year on Friday, a Reuters poll showed, two weeks after the International Monetary Fund called for further tightening.

Turnover was boosted by foreign-buying in conglomerate John Keells Holdings PLC and stood at 1.05 billion rupees ($6.9 million), well above this year's daily average of 672 million rupees.

The index has lost 1.8 percent since March 7, when the IMF called for monetary policy tightening if credit growth or inflation do not abate.

The bourse dipped into oversold territory on Wednesday, with the 14-day relative strength index at 26.758 points versus Tuesday's 34.145, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Foreign investors net bought shares worth 414.6 million rupees, raising the year-to-date net foreign inflow to 3.07 billion rupees in equities.

The treasury bill rates have risen between 33 to 77 basis points since July 28, when the central bank last raised the key interest rates.

Shares in John Keells fell 2.1 percent, while Asiri Hospitals Plc dropped 3.8 percent and biggest listed lender Commercial Bank of Ceylon Plc fell 0.9 percent.

($1 = 151.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares end flat as investors await cbank rate review

Reuters: Sri Lankan shares were little changed on Tuesday in lacklustre trade, hovering near a one-year closing low hit last week, as investors stayed on the sidelines ahead of the central bank's policy review.

The Colombo stock index ended flat at 6,041.59, near its lowest close since March 16, 2016 hit on Thursday.

Turnover stood at 283.3 million rupees ($1.9 million), less than half of this year's daily average of 665 million rupees.

The index has lost 1.2 percent since March 7, when the International Monetary Fund called for monetary policy tightening if credit growth or inflation did not abate.

The central bank's second monetary policy review of the year is due on Friday.

"The market is closely watching for the monetary policy rate announcement and sovereign bonds," said Jaliya Wijeratne, who heads First Capital Equities.

"Local investors are just waiting for some direction, but foreign investors are buying counters."

Foreign investors net bought shares worth 160.8 million rupees, raising the year-to-date net foreign inflow to 2.66 billion rupees in equities.

Shares in Commercial Leasing and Finance Plc rose 8 percent, while Lanka ORIX Leasing Company Plc gained 2.3 percent and Dialog Axiata Plc rose 0.9 percent. 

($1 = 151.5000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares edge down on rate hike concerns ahead of review

Reuters: Sri Lankan shares edged down on Monday, hovering near a one-year closing low hit last week, as expectations of a rate hike continued to weigh on sentiment.

The Colombo stock index fell 0.1 percent to finish at 6,041.17, near its lowest close since March 16, 2016 hit on Thursday. The bourse fell 0.6 percent last week, posting its fourth straight weekly decline.

The index has lost 1.2 percent since March 7, when the International Monetary Fund called for monetary policy tightening if credit growth or inflation did not abate.

The central bank's second monetary policy review of the year is due on March 24.

"Retailers and institutional investors are on the sidelines; investors are awaiting the outcome of the monetary policy announcement," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

Foreign investors net sold shares worth 3.74 million Sri Lankan rupees ($260,296), the first net outflow in 14 sessions. Foreign investors were net buyers of 2.49 billion rupees worth of equities so far this year.

Turnover stood at 439.4 million rupees, less than this year's daily average of 672.2 million rupees.

Access Engineering Plc lost 2 percent following a local media report that the government stopped some development projects in which the company was involved.

Dialog Axiata Plc fell 0.9 percent and conglomerate John Keells Holdings Plc edged down 0.1 percent. 

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

SEC releases Capital Market Strategy 2020

By Duruthu Edirimuni Chandrasekera

The Securities and Exchange Commission of Sri Lanka (SEC) has released its ‘Capital Market Strategy 2020’, a comprehensive transformative plan for Sri Lanka’s capital market, which has been sanctioned by the Cabinet, SEC officials said.

They said that this was done with the intention of providing strategic clarity to market participants and the general public. This plan has components in strengthening regulatory and governance environment, creating an enabling environment for capital formation, increasing accountability and market oversight, deepening liquidity and broad-basing market participation, raising the standards and competencies of capital market participants, developing infrastructure and enabling new products, managing and mitigating systemic risk and building domestic capabilities.

“The developmental objectives focus on the several constraints characterising our market, its small size and scarcity of liquidity, limited diversification in product offering from an investor’s perspective, and in listing platforms from an issuer’s. Additionally, we consider the efficiency and commercial orientation of market institutions, market infrastructure and technology gaps, and community capacity building extending to both the institution and industry,” an official told the Business Times.

The amendment of the SEC Act is among the key initiatives geared towards strengthening the domestic regulatory and governance environment. This Act’s enhancement of the regulatory framework includes the strengthening of the governance standards of the SEC, providing for the establishment of a clearing house acting as a central counterparty (CCP), regulating demutualised exchanges, recognising new categories of market intermediaries, introducing a wide range of enforcement tools to deal with market misconduct, enhancing the accountability of all capital market participants, and encouraging early reporting to the SEC on possible market malpractice through provisions for whistleblower protection.

Rules applicable to all regulatees of the SEC are currently undergoing review and revision with a view to creating a more robust regulatory environment for all and instilling greater discipline market-wide, the SEC said in a statement.

Deepening liquidity

The SEC seeks to actively engage provident funds and pension funds in diversifying their portfolios and increasing asset allocation to capital market investments, it has said noting that increased participation by such long-term institutional investors can improve market stability and sustainability, as a result of their holding power and ability to act in a counter-cyclical manner.

At present, with the broad-basing of market participation in mind, minimum public holding thresholds apply to listed companies upon initial listing, and enforced thereafter on a continuous basis, the official said noting that SEC would drive requisite policy formulation for the introduction of short-selling, securities borrowing and lending, and other new products in order to deepen liquidity.

To increase portfolio choice of investors, the SEC is developing a sequencing framework for the introduction of new products ranging from Real Estate Investment Trusts (REITs) and Exchange Traded Funds (ETFs) to Financial Derivatives. The SEC would enable the introduction of a multi-asset offering for investors by spearheading policy formulation in order to facilitate related rule making by the CSE, the statement added.

Over the medium to long term, far-reaching reforms proposed as part of the Capital Market Strategy 2020 would support the proposition to Morgan Stanley Capital International (MSCI) to reclassify Sri Lanka as an emerging market, providing for broader visibility as an attractive portfolio investment destination, it further said.
www.sundaytimes.lk

Sri Lankan shares recover from 1-yr low on foreign bargain-hunting

Reuters: Sri Lankan shares edged up on Friday from a one-year closing low hit in the previous session and after eight straight sessions of losses as foreign investors bought battered stocks.

The Colombo stock index gained 0.3 percent to finish at 6,047.84, edging up from its lowest close since March 16, 2016 hit on Thursday.

But the bourse fell 0.6 percent during the week, posting its fourth straight weekly decline, due to concerns that the central bank would raise interest rates next week.

The index had lost 1.5 percent over the eight sessions through Thursday since the International Monetary Fund urged Sri Lanka's central bank last week to be ready to tighten monetary policy if credit growth or inflation does not abate.

The central bank's second monetary policy review of the year is due on March 24.

"Foreigners are buying some blue chips that are at very discounted prices," said Atchuthan Srirangan, a senior research analyst with First Capital Equities.

"But retailers and institutional investors are not active."

Foreign investors net bought shares worth 39.5 million rupees ($260,296.54) in the 13th straight session of net-buying, raising the year-to-date net foreign inflow to 2.5 billion rupees in equities.

Turnover stood at 1.17 billion rupees, well over this year's daily average of 676.7 million rupees.

Shares of Sri Lanka Telecom Plc gained 3.3 percent, while Dialog Axiata Plc rose 1.8 percent and conglomerate John Keells Holdings Plc edged up 0.1 percent. 

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares hit 1-yr closing low on rate hike concerns

Reuters: Sri Lankan shares hit a one-year closing low on Thursday, falling for an eighth straight session, as concerns the central bank would raise rates next week weighed on sentiment after the International Monetary Fund urged it to tighten monetary policy.

The Colombo stock index closed 0.06 percent lower at 6,028.57, its lowest close since March 16, 2016.

The index has lost 1.45 percent over the last eight sessions since the IMF urged Sri Lanka's central bank last week to be ready to tighten monetary policy if credit growth or inflation does not abate.

The central bank's second monetary policy review of the year is due on March 24.

"It is a very dull day. Investors are on the sidelines because of the uncertainty and waiting to see the monetary policy decision next week," said Atchuthan Srirangan, a senior research analyst with First Capital Equities (Pvt) Ltd.

Turnover stood at 272.1 million rupees ($1.79 million), about a third of this year's daily average of 667 million rupees.

The bourse slipped further into oversold territory on Thursday, with the 14-day relative strength index at 28.159 points versus Wednesday's 28.701, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Sri Lanka Telecom Plc closed down 2.65 percent. Teejay Lanka Plc fell 1.67 percent.

Foreign investors net bought shares worth 103.2 million rupees in the 12th straight session of net-buying, raising the year-to-date net foreign inflow to 2.46 billion rupees into equities. 

($1 = 151.7500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lankan shares fall for 7th session on rate hike concerns

Reuters: Sri Lankan shares fell for a seventh straight session on Wednesday to a near one-year closing low as expectations of a possible interest rate hike weighed on sentiment, after the International Monetary Fund urged the central bank to tighten monetary policy.

The Colombo stock index closed 0.2 percent lower at 6,032.16, its lowest close since March 29, 2016.

The index has lost 1.4 percent over the last seven sessions since the IMF urged Sri Lanka's central bank last week to be ready to tighten monetary policy if credit growth or inflation did not abate.

The central bank's second monetary policy review of the year is due on March 24.

"Market is down mainly because of the negative sentiment local investors have," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd. "We are also seeing some margin calls coming in."

Most of the investors stayed on the sidelines, resulting in a thin turnover, which stood at 239.9 million rupees ($1.6 million), about a third of this year's daily average of 674.9 million rupees.

The bourse on Wednesday slipped into oversold territory with the 14-day relative strength index at 28.701 points versus Tuesday's 30.958, Thomson Reuters data showed. A level between 30 and 70 indicates the market is neutral.

Shares of Sri Lanka Telecom Plc closed down 2 percent. Biggest listed lender Commercial Bank of Ceylon Plc ended 0.7 percent weaker, while Seylan Bank Plc fell 0.2 percent.

Foreign investors net bought shares worth 60.97 million rupees in the 11th straight session of net-buying, raising the year-to-date net foreign inflow to 2.36 billion rupees in equities. 

($1 = 151.6000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Amrutha Gayathri)

Sri Lankan shares hit 5-wk closing low on rate hike fears

Reuters:Sri Lankan shares hit a five-week closing low on Monday on worries the country's central bank would raise interest rates at a meeting next week after the International Monetary Fund urged it to tighten monetary policy, brokers said.

The Colombo stock index closed 0.23 percent down at 6,070.80, its lowest since Feb. 6. The index shed 0.27 percent last week, posting its third straight weekly decline.

The IMF last week urged Sri Lanka's central bank to be ready to tighten monetary policy if credit growth or inflation does not abate.

The banking regulator is expected to unveil its second monetary policy of the year on March 24.

"The IMF statement on urging the central bank for a possible rate hike has weighed on sentiment," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

Shares of conglomerate John Keells Holding Plc fell 1 percent, while biggest listed lender Commercial Bank of Ceylon Plc ended 1.09 percent weaker.

Foreign investors net bought shares worth 61 million rupees (about $403,041), a ninth straight session of purchases, extending the year-to-date net foreign inflow to 2.18 billion rupees worth of equities.

Turnover stood at 183.3 million rupees, the lowest since Feb.1 and well below this year's daily average turnover of 679.6 million rupees.

Yields on treasury bills have risen to a more-than-four-year high since October despite the central bank keeping key policy rates steady. 

($1 = 151.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Biju Dwarakanath)

Sri Lanka’s RIL Property to list in Rs960mn IPO

ECONOMYNEXT - RIL Property Limited (RIL), a developer, owner and operator of commercial office space in the Sri Lankan capital Colombo is to list its shares on the stock exchange at Rs8 a share.

A statement said RIL intends to offer 120 million ordinary voting shares in the Initial Public Offering (IPO), opening on 04th April 2017, to raise Rs. 960 million. The minimum subscription per application is 100 shares.

The funds will be used to expand RIL’s business operations and its fully owned subsidiary, Foodbuzz (Pvt) Ltd, a franchisee of the BreadTalk Group based in Singapore.

“We see significant demand for commercial office space in Colombo and have responded to this demand through the development of Parkland, a Grade ‘A’ commercial office complex,” said Hiroshini Fernando, chief executive of RIL.

Parkland is a 22-floor office complex in the heart of Colombo.

Commercial Bank of Ceylon and NDB Investment Bank (NDBIB) are acting as Lead Managers and Joint Managers to the IPO.

“The RIL IPO in our view provides an investment opportunity in a company specialised in the development and management of commercial office space, at a reasonable valuation,” said Sushara Vidyasagara, Chief Manager of the Investment Banking Unit of Commercial Bank.

Nilendra Weerasinghe, Head-Corporate Advisory of NDBIB, said the RIL IPO is an opportunity for investors to participate in the growth of the commercial office space segment given that direct investments in the sector require very high capital outlays.

Sri Lankan shares close at one-month low; telcoms lead

Reuters: Sri Lankan shares on Friday hit their lowest close in more than a month, dragged down by telecom stocks, while investor sentiment continued to remain low on concerns about rising interest rates.

The Colombo stock index ended down 0.06 percent at 6,084.99, its lowest since Feb. 6. It shed 0.27 percent during the week, posting its third straight weekly decline.

Foreign investors were net buyers for the eighth straight session on Friday, purchasing shares worth 174.96 million rupees ($1.16 million), and extending the year-to-date net foreign inflow to 2.12 billion rupees worth of equities.

Turnover was 711 million rupees, more than this year's daily average turnover of 690.1 million rupees.

"Foreigners are the only people active in the market these days as not a lot of activities are taking place," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"The market is slowly coming down with rising rates and economic uncertainty."

Traders said there were concerns after the International Monetary Fund urged Sri Lanka's central bank to be ready to tighten monetary policy if credit growth or inflation does not abate.

Shares of Dialog Axiata Plc dropped 0.89 percent, while Commercial Leasing and Fiance Plc plunged 10.71 percent and conglomerate John Keells Holdings dropped 0.14 percent.

Yields on treasury bills have risen to a more-than-four-year high since October, while the central bank has kept the key policy rates on hold.

($1 = 151.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sherry Jacob-Phillips)

Sri Lankan shares fall for third straight session; John Keells down

Reuters: Sri Lankan shares fell for a third straight session on Thursday, posting their lowest close in a month, dragged down by diversified stocks such as John Keells Holdings Plc as investor sentiment continued to remain low on concerns about rising interest rates.

The Colombo stock index ended down 0.1 percent at 6,088.80, its lowest since Feb. 6. It shed 0.6 percent last week in its second straight weekly decline.

Foreign investors were net buyers for the seventh straight session on Thursday, purchasing shares worth 63.6 million rupees ($420,495.87), and extending the year-to-date net foreign inflow to 1.95 billion rupees worth of equities.

Turnover was 875.6 million rupees, more than this year's daily average turnover of 689.7 million rupees.

"The market is mainly down because of John Keells. It is slowly coming down with rising rates and economic uncertainty," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

"Foreigners seem to be the only buyers at the moment."

Traders said there were concerns after the International Monetary Fund urged Sri Lanka's central bank to be ready to tighten monetary policy if credit growth or inflation does not abate.

Shares of John Keells Holdings fell 1.06 percent while Commercial Bank of Ceylon Plc, the country's biggest listed lender, declined 1.29 percent and Carson Cumberbatch Plc dropped 2.91 percent.

Sri Lanka Telecom Plc dropped 1.41 percent and Hatton National Bank Plc ended 1.16 percent weaker.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.2500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Nimal Perera resigns as Royal Ceramic MD; Wants to Re-enter Stock Broking

By Ishara Gamage

Sri Lanka's outgoing Royal Ceramic PLC's (RCL) Managing Director and one-time high net worth investor Nimal Perera, a close confidante of business tycoon Dhammika Perera said that he will re-enter the stock broking business with an acquisition of the struggling existing stock brokerage.

After 13 years of continued services as a CEO/Managing Director of the Royal Ceramic PLC, Nimal Perera has resigned from the company on Tuesday (7th) to build his own business in stock broking, money broking, and manufacturing sector.

He said during his 13 year period, company's assets grew from Rs 500 million to present
Rs 5 billion levels and profitability also grew from Rs 40 million level to Rs 4 billion level.

"Now I'm 58 years old and there will be only a few more years to work before the retirement. So, I decided to build my own businesses with my two sons who were nearing completion of their overseas higher education," he told Ceylon FT.

He said he will soon acquire the existing stock brokerage and money brokerage and plans to enter a suitable manufacturing business.

In 2013 March Perera was first reported as entering the stock broking industry again together with RCL through a deal to buy 51 % control of New World Securities Ltd (NWS). He bought a 32 per cent stake under his personal account whilst RCL purchased a 19 %.

Perera continues to hold the Mercantile Produce Brokers Ltd (MPB) which he bought through his investment arm Don Wilbert Capital for Rs 200 million in 2014.

Nimal Perera last year sold his controlling shareholding of Kalamazoo Systems PLC, a provider of printing solutions for Rs 36 million.

www.ceylontoday.lk

Sri Lanka 03-month Treasury Bill yield reaches 9.47-pct

ECONOMYNEXT – Sri Lankan Treasury Bill yields rose across the board at Wednesday’s auction with the 03-month bill yield rising 09 basis points to 9.47%, the debt office of the central bank said.

The yield on the 06-month bill rose 12 bp to 10.39% at the auction while the 01-year bill yield rose 08 bp 10.74%, a statement said.

The debt office got bids worth Rs49 billion and accepted bids of Rs14.4 billion.

Pan Asia Bank completes Rs 2Bn rights issue

Sri Lanka’s Pan Asia Banking Corporation said they were successful in completing a rights issue to raise up to 2.06 billion rupees.

In December 2016 the bank announced the issue of 147.5 million shares at one new share for every two shares held at an issue price of 14 rupees.

The banks was required to increase it core capital to 7.5 billion rupees by 31st March 2017 to adhere to a new Central Bank rule, the company said in a stock exchange filling.

“At present the banks core capital stands at 8.76 billion rupees after a capital infusion.”

Sri Lanka'B+' rating confirmed by S&P; negative outlook unchanged

ECONOMYNEXT - Standard and Poor's has confirmed a 'B+' rating on Sri Lanka, keeping a 'negative' outlook unchanged, despite improvement is tax revenues, as policy making remained weak amid government infighting.

"The gaps we observe in Sri Lanka's policymaking capacity partly reflect the political uncertainty associated with deeply-rooted factionalism within the government," S & P said.

"We believe this hinders responsiveness and predictability in policymaking and weighs particularly on business confidence, investment plans, and overall growth prospects."

Sri Lanka 'B+/B' Ratings Affirmed; Outlook Remains Negative

OVERVIEW

• The Sri Lankan government's reform efforts and the IMF lending program have led to nascent improvements in the country's fiscal profile.
• We are therefore affirming our 'B+/B' sovereign credit ratings on Sri Lanka.
• The outlook remains negative, however, given Sri Lanka's weak external profile, in particular, its low net reserve levels, and the vulnerability of public finances to any exchange rate shocks.

RATING ACTION

On March 7, 2017, S&P Global Ratings affirmed its 'B+' long-term and 'B' short-term sovereign credit ratings on the Democratic Socialist Republic of Sri Lanka. The outlook on the long-term rating remains negative. We also left our transfer and convertibility risk assessment on Sri Lanka unchanged at 'B+'.

RATIONALE

Over the past year, Sri Lanka's fiscal position has improved as a result of government-led reforms and IMF technical and funding assistance. However, high external debt, and low reserves continue to make Sri Lanka vulnerable to external shocks, in our opinion. Other rating constraints on Sri Lanka include the high general government net debt burden (at 74.9% of GDP in 2016).

Nevertheless, the average maturity of the general government debt profile at approximately seven years is unusually long compared with other emerging market peers'.

With GDP per capita estimated at US$3,911 (2016), Sri Lanka's level of prosperity is low. The authorities, moreover, continue to face significant challenges in effectively addressing structural imbalances due to institutional constraints and a fragmented political landscape. These rating constraints weigh against Sri Lanka's sound growth potential, which speaks to strengths in the garment, tourism, and business process outsourcing sectors.

During 2017-2020, we expect fiscal consolidation to reduce borrowing further.

We project annual growth in general government debt to average 4.4% of GDP for 2017-2020, versus an average of 7.0% annually from 2014-2016. In view of Sri Lanka's robust nominal GDP growth, we project net general government debt to decline to 65% of GDP through 2020, assuming currency stability versus the dollar (and hence a degree of real exchange rate appreciation).

At the same time, we expect only slow progress in reducing debt-servicing costs, which we estimate to account for more than 37% of government revenue in 2017. This is the third-highest ratio among all 131 sovereigns that S&P Global Ratings currently rates, trailing only Lebanon and Egypt(see "Sovereign Risk Indicators," published Dec. 14, 2016; a free interactive version is available at spratings.com/sri).

There are risks to our baseline expectation of declining public debt as a percentage of GDP. In particular, an estimated 43% of Sri Lanka's high stock of central government debt is denominated in foreign currency. That means any significant exchange rate depreciation would again put public debt on a rising trajectory.

We consider exchange rate stability will, therefore, remain a major priority for Sri Lanka's policymakers and its central bank, limiting monetary flexibility. If all of Sri Lanka's public debt were denominated in its own currency, this would not be a rating constraint.

Sri Lanka's external liquidity position has stabilized over the past year, and should be bolstered by support from the IMF. However, Sri Lanka's external metrics are still beset by the following weaknesses:

• We estimate Sri Lanka's usable international reserves were US$3.0 billion as of January 2017, which represents less than two months' coverage of current account payments. These reserves include drawings on currency-swap facilities of US$700 million with the Reserve Bank of India (RBI), introduced in March 2016.

• We forecast the trade deficit to amount to 9.3% of GDP in 2017, a slight improvement from an estimated 10.0% in 2016. While the regulatory regime has been re-calibrated to discourage overwhelming demand for vehicle imports, strong domestic consumption and a robust investment outlook will keep Sri Lanka's structural trade deficit in place.

• Our projection of net current transfers--mostly workers' remittances, of which more than half come from the Gulf states--suggests much slower growth than in previous years, in line with broad weakness in the source countries' economies.

• Short-term capital outflows remain a risk given Sri Lanka's tenuous net international investment position, and continued uncertainty surrounding U.S. monetary and economic policy.

We expect external liquidity (measured by gross external financing needs as a percentage of current account receipts [CAR] plus usable reserves) to average 123% over 2017-2020, compared with 116% in 2015-2016. We also forecast that the country's external debt (net of official reserves and financial sector external assets) will average 160% of CAR from 2017-2020, a notable deterioration from 136% in 2015.

Securing external liquidity support from the IMF has eased the aforementioned external pressures for the time being. We believe the attendant risks could be further mitigated by allowing the Sri Lankan rupee to float more freely.

Although the Central Bank of Sri Lanka (CBSL) has increasingly spoken in favor of a freely floating rupee in recent months, this has yet to manifest in substantially higher reserves. One structural factor in favor of Sri Lanka's external stability is its low banking sector external borrowings.

The gaps we observe in Sri Lanka's policymaking capacity partly reflect the political uncertainty associated with deeply-rooted factionalism within the government. We believe this hinders responsiveness and predictability in policymaking and weighs particularly on business confidence, investment plans, and overall growth prospects.

Elsewhere, we believe that the CBSL's ability to sustain economic growth while attenuating economic or financial shocks continues to improve. Although the CBSL is not independent of other policymaking institutions, the central bank is building a record of credibility, shown in reducing inflation through the use of market-based instruments to conduct monetary policy, as well as the planned introduction of an inflation-targeting regime.

Sri Lanka's growth outlook continues to be underpinned by government investment (including rebuilding the war-torn northern districts), rising tourist arrivals, and moderate inflation, which we expect to remain in the single digits.

We expect Sri Lanka's growth prospects to remain favorable. We believe the country will most likely maintain growth in real per capita GDP of 4.5% per year over 2017-2020 (equivalent to 5.2% real GDP growth). Stronger growth, in our view, would require improved institutional settings and a pick-up in export markets.

Combining our view of Sri Lanka's state-owned enterprises and its small financial system (banks' loans to the private sector account for only about a third of GDP), we view the government's contingent liabilities as limited.

OUTLOOK

The negative outlook indicates that we could lower our rating on Sri Lanka in the next 12 months if (1) we see signs of a reversal in reform momentum,

(2) currency pressure leads to substantial increases in public debt,

(3) reserve levels decline further, or

(3) contingent liabilities from state-owned enterprises worsen the general government's financial position.

We may revise the outlook back to stable if Sri Lanka's external and fiscal indicators continue to improve, or if we conclude that the nascent strengthening of Sri Lanka's institutions and governance practices is on a more sustainable footing.

Nimal Perera resigns from key firms controlled by Dhammika Perera

ECONOMYNEXT - Nimal Perera, a prominent figure in the Vallibel group of business tycoon Dhammika Perera has resigned suddenly from several key companies in the group.

Royal Ceramics said Perera had resigned as managing director from March 07.

He also resigned from the boards of Hayleys Plc, Haycarb, Amaya Leisure, The Kingsbury, and Talawakelle Plantations.

Nimal Perera had been associated with Dhammika Perera and Royal Ceramics for several years.

Dhammika Perera and controls over 20 publicly traded firms in Sri Lanka.

Sri Lanka brush maker Beira group IPO oversubscribed

ECONOMYNEXT - Sri Lanka's BPPL Holdings, a brush exporter also known as Beira Group, said its initial public offer of 30.68 million ordinary shares at Rs12 each was oversubscribed and closed on the opening day Tuesday.

A stock exchange filing said it got applications for over Rs368.2 million.

Hirdramani Investment Holdings (Pvt) Ltd, which owns a 23.4 percent stake, sold down 30.6 million shares (10 percent stake) to raise Rs368.2 million.

B P P L Holdings Ltd. has got approval from the Colombo Stock Exchange to list on the Diri Savi second board.

Sri Lankan shares post 1-month closing low; foreign investors extend buying

Reuters: Sri Lankan shares fell to their lowest close in one month on Wednesday, led by financial and telecommunication stocks as investor sentiment continued to remain low on concerns about rising interest rates.

Foreign investors were net buyers for the sixth straight session, purchasing shares worth 154.8 million rupees ($1.02 million), and extending the year-to-date net foreign inflow to 1.88 billion rupees worth of equities.

Foreign trading accounted for more than 50 percent of the day's turnover of 1.06 billion rupees. This year, the daily average has been 685.5 million rupees.

"Foreign investors are buying stocks in which they see some value after prices have come down," said Hussain Gani, deputy CEO at Softlogic Stockbrokers.

The Colombo stock index ended down 0.21 percent at 6,095.07. It shed 0.6 percent last week in its second straight weekly decline.

Traders said there were concerns after the International Monetary Fund urged Sri Lanka's central bank to be ready to tighten monetary policy if credit growth or inflation do not abate.

Shares in Commercial Bank of Ceylon Plc, the country's biggest listed lender, fell 1.27 percent while Dialog Axiata Plc declined 0.89 percent.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.3000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lankan shares ease; interest rate concerns weigh

Reuters: Sri Lankan shares ended slightly weaker on Tuesday, with financial and manufacturing stocks dragging down the index as investor sentiment continued to remain low on concerns about rising interest rates.

The Colombo stock index ended down 0.15 percent at 6,108.11, On Friday the bourse hit its lowest close since Feb. 9. It shed 0.6 percent last week in its second straight weekly decline.

Foreign investors were net buyers of shares worth 379.6 million rupees ($2.51 million) on Tuesday, extending the year-to-date net foreign inflow to 1.73 billion rupees worth of equities.

Turnover was 539 million rupees, less than this year's daily average of 676.9 million rupees.

"Retail and institutional segment is on silent (mode) with the high interest rates and economic uncertainty," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

The International Monetary Fund on Tuesday urged Sri Lanka's central bank to rebuild international reserves, while maintaining exchange rate flexibility, and to be ready to tighten monetary policy if credit growth or inflation do not abate.

Shares in Ceylon Cold Stores Plc fell 2.51 percent while Commercial Leasing & Finance Plc lost 6.67 percent.

Yields on treasury bills have risen to a more-than-four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.1500 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Sunil Nair)

Central Finance completes Isuru Leasing amalgamation

Central Finance Company PLC said its amalgamation with Isuru Leasing Company Limited has been completed and as such the latter ceased to exist as a corporate entity with effect from February 28, 2017. 

Central Finance signed a share sale and purchase agreement to buy a majority stake in Isuru Leasing as part of the Central Bank-initiated financial sector consolidation plan during the previous government. 

Accordingly, in November 2014, Central Finance purchased a 90.1 percent stake in Isuru Leasing for a consideration of Rs.310.4 million. Isuru is a Kandy-based relatively small finance/leasing company.

www.dailymirror.lk

Sri Lanka Commercial Bank to raise Tier l capital with rights issue

(LBO) – Sri Lanka’s Commercial Bank has decided to raise 10 billion rupees through a rights issue of voting and non voting shares, the company said in a stock exchange filing.

Subject to stock exchange and shareholder approval, the bank is to issue 84,515,987 ordinary voting shares at 113.60 rupees each in the ratio of one share for every ten shares held.

The bank will also issue 5,811,601 ordinary non voting shares at 90.80 rupees each in the same ratio.

It is expected to raise 9.6 billion rupees through ordinary voting shares and 527 million rupees through non voting shares after making adjustment for 2 rupees scrip dividend which is yet to be approved.

AGM of the bank is scheduled to be held on 30 March 2017 and an extraordinary meeting will also be held after the AGM to obtain shareholder approval for the rights issue.

The bank said the objective of the issue is to increase the Tier l capital of the bank in order to accommodate and facilitate future business growth of the Bank.

The current stated capital of Commercial Bank of Ceylon is 25 billion rupees.

Sri Lanka SEC approves All or None blocks in trading of stocks

(LBO) – Sri Lanka’s securities regulator has approved the Automated Trading System rules and corresponding amendments to the Central Depository Systems rules developed by the CSE to facilitate trading of All or None (AON) blocks.

AON is an instruction used on a buy or sell order that instructs the broker to fill the order completely or not at all. If there are not enough shares available to fill the order completely, the order is canceled when the market closes.

An AON order is considered a duration order because the investor provides instructions to the trader about how the order must be filled, which impacts how long the order remains active.

The SEC said in a statement that the ATS is designed to match buy and sell orders placed by stock broker firms of the CSE.

Accordingly, several mechanisms can be used to transact securities including the Normal Order Book, Crossings and the AON facility.

The AON order facility is designed to facilitate the sale or purchase of a large quantity of securities. The minimum number of securities required for an AON Block shall be at least 10 percent of the number of securities issued.

“In the wake of the Government’s programme to restructure SOEs, the AON can be a medium through which strategic stakes in Government owned entities can be transacted in a transparent manner in a competitive environment,” the SEC said.

“The AON method will assist in the disposal of such assets at the optimum price.”

The SEC said the AON method has many advantages over using the Normal Order Book and Crossings mechanism.

“Transactions using the AON method will be open for bidding for 3 market days whereas there is no such requirement either in the Normal Order Book or the Crossings mechanism,”

“Further, transactions using the AON method will have a lower systemic risk since clearing and settlement of transactions will take place on a defacto delivery vs payment basis.”

Another facility provided in the AON method is the facility for a consortium of buyers to bid for the parcel collectively which will help improve liquidity.

Sri Lankan shares edge up; beverage, telecoms lead

Reuters: Sri Lankan shares closed slightly firmer on Monday, after posting a more than three-week closing low in the previous session, with beverage and telecom stocks driving the gains.

However, investor sentiment continued to remain low amid concerns about rising interest rates.

The Colombo stock index ended up 0.26 percent at 6,117.19, after posting its lowest close since Feb. 9 on Friday. It shed 0.6 percent last week in its second straight weekly decline.

Foreign investors were net buyers of shares worth 384.7 million rupees ($2.55 million) on Monday, extending the year-to-date net foreign inflow to 1.35 billion rupees worth of equities.

Turnover was 711.9 million rupees, more than this year's daily average of 680.1 million rupees.

"Some crossings boosted the turnover. The good sign is we are seeing continued foreign buying these days," said Dimantha Mathew, head of research, First Capital Equities (Pvt) Ltd.

"Local investors are on the sidelines, mainly because of the high interest rates and economic uncertainty."

Shares in Ceylon Cold Stores Plc jumped 6.12 percent, Lion brewery (Ceylon) Plc rose 6.27 percent, Ceylon Tobacco Company Plc gained 0.71 percent, and Sri Lanka Telecom Plc climbed 2.41 percent.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.0000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Sri Lanka February tourist arrivals down 0.1-pct

The number of tourists visiting Sri Lanka down 0.1% in February 2017 from a year ago with strong gains seen from traditional markets like United Kingdom and new markets India maintaining their growth momentum.

Sri Lanka received 197,517 visitors in February and tourist arrivals in the first 2 months of the year have risen 6.4% from the year before, the tourist office said.

India remained the main market in February 2017.

Sri Lanka's Sampath Bank flags competition from telcos

ECONOMYNEXT - Sri Lanka's Sampath Bank Plc has drawn attention to the threat banking faces from competition from mobile phone companies which are offering payment and other transaction services.

“The year ahead is likely to present an uncertain operating environment,” Sampath Bank Managing Director Nanda Fernando told shareholders in the firm’s annual report.

“We are also likely to experience strong competitive pressures, not only from peers in the banking industry, but also from telcos that appear to be intruding into our territory.”

Nonetheless, Fernando said, Sampath Bank stands firm in its determination to maintain its growth momentum, both in terms of the top line as well as the bottom line.

Fernando said Sampath Bank was focusing in improving its digital online banking facilities to cater to changing technology and consumer trends.

“Additionally, cost management and the promotion of electronic delivery channels will continue to be absolute priorities in our medium term growth agenda,” he said.

Norway's Norges Bank fund invests US$65mn in Sri Lanka stocks

ECONOMYNEXT - Norges Bank Investment Management (NBIM), a sovereign wealth fund in Norway has invested 65 million US dollars in Sri Lanka stocks over the past two years, the Royal Norwegian Embassy said.

NBIM, which comes under the Norges Bank, the country's central bank, has started by investing 31 million dollars in 2016 and doubled it to 65 million dollars in 2016.

"It must also be noted that the Norwegian Central Bank is completely independent from the Norwegian Government, therefore, this fund is not used as an instrument of the Norwegian government’s foreign policy, or as a tool in foreign aid," the statement said.

"The only mandate for the Norwegian Central Bank is to safeguard and ensure further growth of the fund.

"Therefore, the investments in Sri Lanka from the Norwegian sovereign wealth fund is an indication of the investor confidence and the potential investment opportunities that are available in the market."

The Norwegian Government Pension Fund Global is a sovereign wealth fund, which manages oil and gas profits of the government, where real returns are used for budgetary spending.

It has 890 billion dollars in assets, (about 1.3 percent of world stocks) of which 16 percent is in Asia. Japan has 9 percent, China 2.7 percent and India 1 percent. About 0.6 percent is in Africa.

Europe and North America has 78 percent.

"However, this is likely to change as the Norwegian Central Bank has indicated that they will shift more of their investments toward emerging economies in the future," the statement said.

Sri Lanka Telecom December quarter loss turns to profit

(LBO) – Sri Lanka Telecom group, the island’s largest fixed line operator, said profits rose to 124 million rupees in the December quarter from 383 million rupee loss reported a year earlier.

The group’s interim accounts reported earnings of 0.07 rupees per share for the quarter against a loss of 0.21 rupees per share recorded a year ago.

In the 12 months to December, the group reported earnings of 2.65 rupees per share on total profits of 4.7 billion rupees.

The company’s stock was last traded at 33.60 rupees on Wednesday.

Sri Lanka Telecom revenues in the quarter were 18.1 billion rupees, up six percent from 2015, and operating costs rose three percent to 13.9 billion rupees.

During the year ended December 2016, the group has acquired assets at a cost of 31,069 million rupees excluding capitalized borrowing costs — as at 31 December 2015 it was 12,390 million rupees.

No dividend was declared by the company for the quarter ended 31 December 2016 though a dividend of 1,606 million rupees was paid 24 May 2016 for the financial year ended 31 December 2015.

Percentage of public holding as at 31 December 2016 is 5.52 percent and number of shareholders representing the public holding is 12,213.

Mobitel (Pvt) limited acquired 87.59 percent of shares of E-channeling through a voluntary offer for a total consideration of 641.85 million rupees.

The transaction of the acquisition was completed on 14 September 2016. E-channeling has been consolidated as a subsidiary for the financial year ended 31 December 2016.

The group is primarily involved in providing broad portfolio of telecommunication services across Sri Lanka.

The services provided by the group also include internet services, data services, domestic and international leased circuits, broadband, satellite uplink, maritime transmission, IPTV service and directory publishing service.

Sri Lankan shares edge up on foreign investor buying

Reuters: Sri Lankan shares closed marginally higher on Thursday after posting a near three-week closing low in the previous session, as foreign investors bought recently battered stocks while concerns about rising interest rates continued to hurt investor sentiment.

The Colombo stock index ended up 0.09 percent at 6,127.11, after closing at its lowest since Feb. 9 on Wednesday.

Foreign investors were net buyers of 292.6 million rupees ($1.94 million) worth of shares, extending the year-to-date net foreign inflow to 892.2 million rupees worth of equities.

Turnover was 783.9 million rupees, more than this year's daily average of 666.6 million rupees.

"Market continues to move sideways but today we have seen some institutional and foreign buying," said Dimantha Mathew, head of research at First Capital Equities (Pvt) Ltd.

Sri Lanka Telecom Plc ended 3.87 percent higher after reporting a group net profit of 289 million rupees for the December quarter, compared with a net loss of 157 million rupees a year earlier.

Trans Asia Hotels Plc jumped 8.12 percent, while Commercial Leasing & Finance Plc rose 3.45 percent.

Yields on treasury bills have risen to a more than four-year high since October, while the central bank has kept key policy rates on hold. 

($1 = 151.1000 Sri Lankan rupees) 

(Reporting by Ranga Sirilal and Shihar Aneez; Editing by Subhranshu Sahu)

Better capital allocation with integrated stock markets, Sri Lanka forum told

ECONOMYNEXT – The integration of South Asian stock markets was discussed at a forum in Sri Lanka whose regulator said more interconnected markets would ensure the region remains a growth hotspot with better allocation of capital and efficient sharing of risks.

The region should work towards developing a regulatory environment which encourages stock exchanges to embrace integration, said Thilak Karunaratne, chairman of the Securities and Exchange Commission of Sri Lanka.

“There is a need towards greater integration of markets where there are no barriers to the movement of capital and there is easy access to each other’s stock markets,” he told a forum of the South Asian Federation of Exchanges (SAFE) in Colombo.

“More recently, capital market integration has continued to accelerate, as new investing opportunities emerge,” he said.

“Unfortunately, South Asia is the most malintegrated region in the world as a result of highly restrictive national policies governing financial markets,” Karunaratne said.

Domestic markets can derive “substantial benefits” from regional integration including better allocation of capital, efficient sharing of risks, enhanced portfolio diversification and lower cost of capital, he said.

“On the other hand various barriers including regulatory, information, infrastructure and taxation pose serious challenges to integration,” Karunaratne said.

“A strong framework for prudential regulation is necessary to ensure that risks arising from integration are being assessed and managed well.

“Removal of controls on capital transactions within the region, harmonization of capital market infrastructure including regulations, taxation, accounting, trading systems and cross-listings of securities are necessary steps to move towards regional financial integration,” Karunaratne said.

Leaders from the other South Asian capital markets were united in their call at the forum for improved integration of regional markets, a statement by the Colombo Stock Exchange (CSE) said.

SAFE aims to foster collaboration and co-operation among its members in order to develop their respective capital markets.

Domestic exchanges have much to gain if they reinforce and improve effort towards integration, said Vajira Kulatilaka, Chairman of SAFE and CSE.

“The role and impact of an exchange today is well beyond what was defined at the inception of SAFE as an organization. This is even more so for emerging and developing countries, which many of us are a part of. It is therefore quite relevant that SAFE today looks at evolving as an organization,” he said.

Smaller exchanges in the region have the ability to benchmark more developed peers, while more developed ones have the privilege of shaping the future of fellow regional exchanges – a process that is brought into the table through affiliation, Kulatilaka said.

Shalini Gokhool, Manager of the Stock Exchange of Mauritius, said that since 2010 they had embarked on an internationalization strategy, trying to innovate in terms of products and getting more players to come to the market.

“Today we have created a flexible and enabling regulatory environment to list a variety of products ranging from global funds, depository receipts, and a number of specialist securities such as specialist debt securities, and exchange traded funds.”